Starting with the average man’s perspective on picking individual stocks, Larry moves to emphasize a general market perspective as a more sound, but more difficult way to approach trading. The fundamentals of stock trading require a system of placing your bets, so-as to minimize risk. Buying on a rising market is the most comfortable way of buying stocks. He explains that when he is bearish and he sells a stock, each successive sale must be at a lower price than the previous. The reverse is true in a bull move. The system of how to put on a full position requires the position to prove itself correct before building a complete position.

The story that follows of Deacon S.V. White and his dialogue with an excited informant is another great one.

It is the classic mental game that every trader must recognize within themselves; the conversation between calm appraisal and emotional excitement.

The old and wise trader speaks softly and asks open ended questions. He in not ruffled by the intensity of the informant’s belief in the tip he has brought along and does not become angry in retaliation – even when the tipster lost emotional control and started lashing out at old Deacon. Mr. White, goes to the market for confirmation of the tip, first testing to see if there is a lot of buying pressure – by selling and watching the tape for the market’s reaction – then covering his shorts and taking a long position. Instead of acting blindly on the tip in the rush of emotional certainty, he confirms by observing the market itself.

Larry closes this chapter re-stating that in starting a movement, it is unwise to take on your full line…and… after the initial transaction, don’t make a second unless the first shows you a profit. Wait and watch – much depends upon beginning at exactly the right time.